ASIM HAFEEZ, J.:- The petitioner hereby impugns order dated 11.01.2019 of the respondent No.1, issued in exercise of powers under section 29, sections 30, 31, 31-A and section 32 of the Securities and Exchange Commission of Pakistan Act, 1997 ("Act of 1997"), whereby a team, comprising of officers of the Commission, was constituted to investigate qua the allegations in order under reference. Pursuant thereto, letter dated 12.01.2019 was issued to the petitioner company for the provisioning of record stated therein, which is also impugned herein.
2. Brief facts, necessary for the adjudication of the lis at hand, are that petitioner was incorporated on 10.01.2005 as a company limited by guarantee under section 42 of the erstwhile Companies Ordinance 1984 (Ordinance of 1984).
It transpired that earlier proceedings were initiated under section 263 (c) of Ordinance of 1984, on complaints, which culminated into appointment of inspectors vide order dated 07.08.2009. The order was impugned before the Appellate Bench of the Commission, which appeal was dismissed on 24.12.2009. The Company filed appeal before Hon'ble Islamabad High Court, Islamabad under section 34 of the Act of 1997, which was allowed on 17.01.2017.
3. In December 2018, Mr. Manzar Latif - ex-promoter / subscriber / ex-director - filed another complaint with Human Rights Cell, Supreme Court of Pakistan, whereupon comments were solicited from the Commission. The Commission issued order dated 11.01.2019 to investigate into allegations, impugned alongwith letter dated 12.01.2019.
Respondent No.1 submitted reply, placed documents on record and contested the petition.
4. Learned counsel for the petitioner contends that order to investigate, is per-se, an adverse action, which cannot be issued without affording an opportunity of hearing. It tantamount to violate the mandate of Article 10-A of the Constitution of Islamic Republic of Pakistan 1973. Contends, that petitioner was otherwise entitled to prior notice, before passing of order to investigate, in terms of sub sections (3) and (5) of section 22 of the Act of 1997. Adds, that if any action is warranted it can be initiated under sections 256 and / or 257 of Companies Act 2017 (Act of 2017) after affording an opportunity of hearing. Further contends, that in the wake of clause (a) of section 4 of Act of 2017, which gave overriding effect to the provisions of Act of 2017, no order can be passed by the Commission under section 29 of the Act of 1997. Adds that there was no justification, reasons and occasion to order investigation into affairs, when read in juxtaposition to the comments submitted by respondent No.1 with the Human Rights Cell, Supreme Court of Pakistan. Learned counsel alleged manifest bad faith on the part of the Commission. Added that order of investigation would have an adverse effect on the business and working of the Company and damage repute of its members. Lastly submits that appeal, in view of the facts and circumstances, is not an adequate remedy and if at all remedy of appeal is deemed effective and appropriate, instant petition may be converted into appeal as this court also exercises appellate jurisdiction. To support its contentions, learned counsel referred judgments, reported as "Messrs KALOODI INTERRNATIONAL (PVT.) LTD. and another v. FEDERATION OF PAKISTAN and others" (PLD 2001 Karachi 311), "SERVICE INDUSTRIES TEXTILES LIMITED, LAHORE v. SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN through Chairman, Blue Area, Islamabad and 4 others" (2000 MLD 1880), "Rohtas Industries Ltd. v. S. D. Agarwal and another, etc." (AIR 1969 SC 707, "(1) UNIVERSITY OF DACCA THROUGH ITS VICE-CHANCELLOR AND (2) THE REGISTRAR, UNIVERSITY OF DACCA v. ZAKIR AHMED" (PLD 1965 SC 90), "Mian MIRAJ DIN and others v. BROTHERS STEEL MILLS and others" (1996 CLC 516), "ABDUL MAJEED ZAFAR and others v. GOVERNOR OF THE PUNJAB through Chief Secretary and others" (2007 SCMR 330), "M.D. THE BANK OF PUNJAB and another v. Syed SHAHZAD HUSSAIN" (2006 SCMR 1023), "Messrs DEWAN SALMAN FIBER LTD. and others v. GOVERNMENT OF N.W.F.P., through Secretary, Revenue Department, Peshawar and others" (PLD 2004 SC 441), "Messrs PRIME CHEMICALS through Member of Association of Person v.
GOVERNMENT OF PAKISTAN through Secretary Finance, Islamabad and 3 others" (2004 PTD 1388), "GHULAM SARWAR ZARDARI v PIYAR ALI alias PIYARO and another" (2010 SCMR 624), "THE MURREE BREWERY Co.
Ltd. v. PAKISTAN THROUGH THE SECRETARY TO GOVERNMENT OF PAKISTAN, WORKS DIVISION AND 2 OTHERS" (PLD 1972 SC 279), and "MUHAMMAD ANIS and others v. ABDUL HASEEB and others" (PLD 1994 SC 539). Learned counsel has also relied on an un-reported judgment of this court in Writ Petition No.20088 of 2012.
5. Learned counsel appearing for respondents No.1 to 5 controverted the submis sions. The case set out is that petitioner is a section 42 company , which has received financial assistance / donations in millions, both from local and foreign sources, but no details were provided, which deliberate non-disclosure s led the Commission to invoke section 29 of the Act of 1997. Adds, that order to investigate is in the nature of an administrative order , a fact- finding inquiry , to find out the facts qua the allegations. Order to investigate does not carry any stigma nor per se incriminating, as no inspectors are being appointed yet. And once incriminating evidence / information / material is discovered, as a consequence of this fact-finding endeavor , the petitioner would be confronted with said information. To rebut arguments regarding overriding effect of clause(a) of section 4 of the Act of 2017, reference is made to section 45 of Act of 1997, non-obstante clause giving preference to Act of 1997 in case of any inconsistency.
Further contends that sub-sections (3) and (5) of section 22 of Act of 1997 are not applicable, which envisaged a different situation and has no application with respect to the order to investigate. Per learned counsel, this petition is not maintainable in view of the remedies available under Act of 1997. Added, that this petition cannot be converted unless remedy under section 33 of the Act of 1997 availed. In support of its contentions, reference is made to the judgments reported as "ATTOCK REFINERY LTD. v. EXECUTIVE DIRECTOR ENFORCEMENT AND MONITORING DIVISION, S.E.C.P. and another" (PLD 2010 SC 946), "Raja Narayanlal Bansila v. Maneek Phiroz Mistry And Another" (1961 AIR 29, 1961 SCR (1) 417), "Barium Chemicals Ltd. and another v. Company Law Board and others" (AIR 1967 SC 295 (V 54 C 59), "DIAMOND INDUSTRIES LIMITED v. APPELLATE BENCH OF THE SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN and others" (2002 CLD 1714) and "Mian MIRAJ DIN and others v. BROTHERS STEEL MILLS and others" (1996 CLC 516).
6. While rebutting the submissions, emphasizes was laid on the ratio settled in Rohtas Industries Limited' s case, supra, to highlight adverse ef fects of order of investigation.
7. Arguments heard. Available record perused.
8. The controversy, raised, hinges on the scope, extent and nature of the powers of the Commission in terms of section 29 of Act of 1997, particularly when read in juxtaposition with the powers under sections 256 or 257 of Act of 2017, and existence of conditions / factors, which necessitates order for investigation qua the affairs of the company . It is expedient to reproduce relevant sections, before proceeding to determine and decide the controversy . Relevant sections read as; Sub-section (1) of Section 29 of Act of 1997 Investigation and proceedings by the Commission.
(1) Where the Commission, either on its own motion or on the basis of any information received, authorize one or more of its employees or one or more other persons to investigate, whether--
(a) an offence or a contravention has been committed by any person under this Act or any administered legislation or a subordinate legislation;
(b) a regulated person has been engaged in committing fraud, misfeasance or other misconduct in carrying on a regulated activity; or
(c) the manner in which a regulated person has engaged or is engaging in his regulated activity is not in the interest of the financial services market or investors, And submit an investigation report thereof to the Commission, the Commission shall proceed in the matter in accordance with the provisions of the Act and the administered legislation: Provided that where any special proced ure regarding investigation or inquiry is provided in the administered legislation the Commission may adopt such special procedure in addition to the procedure provided in this Act."
Sub-section (3) and (5) of Section 22 of Act of 1997 Section 22: Supplementary Provisions (1)...
(2)...
(3) The Commission shall, in adjudicatin g upon the rights of any person whose application on any matter it is required to consider in the exercise of any power or function under this Act, give the reasons for its decision after giving the person concerned a personal hearing, in addition to any written applications or submission which may be required to be made.
(4)...
(5) Subject to the compliance of the provisions of sub-section (3), section 24 A of the General Clauses Act, 1897 (X of 1897), shall apply to any order made or direction given under this Act.
Section 45 of Act of 1997 "Act to override other laws.- The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force."
COMP ANIES ACT 2017 Section 4 Act to override; - Save as otherwise expressly provided herein -- a) the provisions of this Act shall have effect notwithstanding anything contained in any other law or the memorandum or articles of a company or in any contract or agreement executed by it or in any resolution passed by the company in general meeting or by its directors, whether the same be registered, executed or passed, as the case may be, before or after the coming into force of the said provisions; and Section 256.
Investigation into affairs of company; (1) Where the Commission is of the opinion, that it is necessary to investigate into the af fairs of a company--
(a) on the application of the members holding not less than one tenth of the total voting power in a company having share capital;
(b) on the application of not less than one tenth of the total members of a company not having share capital;
(c) on the receipt of a report under sub section (5) of section 221 or on the report by the registrar under sub-section
(6) of section 254; It may order an investigation into the affairs of the company and appoint one or more person s as inspectors to investigate into the af fairs of the company and to report thereon in such manner as the Commission may direct; Provided that before making an order of investigation, the Commission shall give the company an opportunity of being heard.
Section 257.
Investigation of company' s affairs in other cases; (1) Without prejudice to its power under section 256, the Commission--
(a) shall appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the Commission may direct, if---
(i) the company, by a special resolution, or
(ii) the Court, by order , declare that the af fairs of the company ought to be investigated; and
(b) may appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the Commission may direct if in its opinion there are circumstances suggesting--
(i) that the business of the company is being or has been conducted with intent to defraud its creditors, members or any other person or for a fraudulent or unlawful purpose, or in a manner oppressive of any of its members or that the company was formed for any fraudulent or unlawful purposes; or
(ii) that persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance, breach of trust or other misconduct towards the company or towards any of its members or have been carrying on unauthorized business; or (iii)...
(iv)...
(v)...
(vi) that the affairs or the company are not being managed in accordance with soun d business principles or prudent commercial practices; or (vii)...
Provided that, before making an order under clause (b), the Commission shall give the company an opportunity of being heard. [Emphasis supplied]
9. Learned counsel for the petitioner has objected to the exercise of authority / powers by the Commission under section 29 of Act of 1997, which objections attack very act of assumption of jurisdiction. The objections are broadly summarized for convenience; i) Whether Commission can exercise authority under section 29 of Act of 1997 in view of clause (a) of section 4 of the Act of 2017, which gives overriding effect to the provisions of Act of 2017, notwithstanding anything contained in any other law; ii) what are those conditions / factors that led the Commission to invoke section 29 of Act of 1997 without resorting to appointment of inspectors under sections 256 and / or 257 of the Act of 2017, in terms whereof the company and its members are entitled to an opportunity of hearing.
10. The submissions regarding preference / exclusivity extended to the provisions of Act of 2017, in view of clause
(a) of section 4 of Act of 2017, is the heart of the controversy. A plain reading would establish that preferential status has been extended to the provisions of Act of 2017 but it was qualified. The expression, save as otherwise expressly provided herein is crucial and controls the extent of the preference extended. Is there anything expressly provided in the Act of 2017? It appears that sub-section (2) of section 7 of Act of 2017 prescribes said qualification, when read in conjunction with clause (a) of section 4, ibid. It is expedient to reproduce section 7 of Act of 2017, which reads as; Section 7; Powers and Functions of the Commission;
(1) The Commission shall exercise such powers and perform such functions as are conferred on it by or under this Act.
(2) The powers and functions of the Commission under this Act shall be in addition and not in derogation to the powers and functions of the Commission under the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997) [Emphasis supplied]
11. The legislative intent is clear and obvious. The powers and functions of the Commission under Act of 2017 are in addition to and not in derogation of the powers and functions under Act of 1997. Notwithstanding clause (a) of section 4 of the Act of 2017, the Commission is empowered to invoke section 29 of Act of 1997 to order for investigation, which is an independent power and protected in terms of sub-section (2) of section 7 of Act of 2017. The legislature has reinforced legislative intent of section 45 of Act of 1997 as far as the powers and functions of the Commission are concerned. This addresses the objection regarding assumption of authority by the Commission.
12. The Commission is empowered to exercise discretion under section 256 of Act of 2017, which discretion is regulated and subjected to the conditions prescribed therein, existence of such conditions need not to be reiterated as the controversy does not relate to the appointment of inspectors under section 256, ibid. In terms of clause (a) of sub-section (1) of section 257 of Act of 2017, the Commission is obligated to appoint inspectors for conduct of investigation, if ordered by the Court of competent jurisdiction or upon passing of special resolution by the company . However , under clause (b) of sub-section (1) of section 257, ibid, the Commission may appoint inspectors to conduct investigation if in its opinion there are circumstances suggesting existence of the conditions prescribed, which circumstances are enumerated therein. One common feature of sections 256 & 257 of Act of 2017 is that before making an order of investigation, the Commission is required to give company an opportunity of being heard. No such concession / opportunity was provided under section 29 of Act of 1997.
13. Now the question is that whether such circumstances and factors exist, which warrant or necessitate action under section 29 of Act of 1997 by the Commission. The Commission, when deciding whether to order investigation into the affairs of the company under sections 256 and 257 of Act of 2017, may have to consider and weigh multiple factors, which inter alia includes the nature of the complaint and its source. If complaint is filed by the requisite number of the members, the Commission may resort to section 256 of Act of 2017, provided material is available to assist in formation of opinion. Likewise, under section 257 of Act of 2017, the Com mission without prejudice to its powers under section 256, may proceed accordingly , as the situation may warrant in view of the clause (a) and (b) of sub section (1) of section 257. The scope and extent of powers, circumstances and considerations for invoking section 29 of Act of 1997 are different. Perusal of the allegations would establish proximity with the action taken. It is expedient to reproduce the allegations - allegedly raised in the complaint and led to the order for investigation - as appearing in the order dated 1 1.01.2019, which read as; "ALLEGATIONS:
(i) The Company is raising fund from foreign and local donors without maintaining proper record for utilization of such donations.
(ii) SECP had initiated investigation on his complaint dated Jan 31, 2009, but the Company management got their accountant arrested on false charges of stealing of company' s entire accounts record though the accountants had resigned before lodging of FIR. The location where the alleged theft took place was never a registered office of the Company and the FIR was lodged by a company other than the Company .
(iii) The Company has shown all the medical aid received from foreign donors as purchased in cash, which bring into doubt the demeanor of the Company .
(iv) The Company announced construction of hospital for a sum of Rs.38 crores, however , till date, the site where the hospital was to be constructed consist of a dilapidated boundary wall. It can very well be gauged that the said hospital is a faade in order to extract donations from donors."
14. The exercise of discretion by the Commission would be guided / determined by the facts and circumstances of the case but has to be exercised in good faith, without any bias, prejudice or ulterior motives. The reasons / circumstances mentioned in the order dated 11.01.2019 are sufficient to initiate investigation. The petitioner company has nowhere denied factum of receipt of donations and not specifically rebutted the allegations, which it was supposed to do, particularly when allegations of bad faith are attributed to the Commission. The allegations of bad faith, in view of the facts and circumstances of the case, are unsubstantiated. The scope and implications of of order of appointing investigators for conducting investigations under the Companie s Act, has been discussed in a judgment, reported as Norwest Holst Ltd v. Secretary of State for Trade (1978) 3 All ER 280. The brief facts of said case are that Plaintif f was Public Limited Company . On 11 March 1977, the Secretary of State appointed two inspectors to investigate the affairs of the Company under section 165 of the Companies Act 1948. The Company sought information, made basis for taking such an action. The Secretary refused to give information. The Companyth brought an action claiming declaration that appointment of inspectors was ultra vires and of no legal effect and an injunction. The decision of the case is reproduced hereunder; Held: The decision of the Secretary of State to appoint inspectors under s 165 (b)(ii) was no more than an administrative decision the effect of which was to set in train an investigation at which those involved would have an opportunity of stating their case. There was therefore nothing in the rules of natural justice which required him to give the company an opportunity of stating its case before he made his decision to set up the investigation. The only requirement was that he should make his decision in good faith and there was no evidence to suggest that he had not done so.
Relevant portions authored by Lord Denning are reproduced hereunder: "As the Secretary of State gave no information, the company started this action. They delivered a statement of claim, which they afterwards amended. The burden of the statement of claim is that the company know of no wrongdoing which has been done by them or any of their people; and therefore it was wrong that the Secretary of State should appoint inspectors without, as they say, any proper justification. They put it in these words in their final amended pleadings: .... it is implicit in the provisions of Section i65(b)(ii) of the said Act that the discretionary power to appoint Inspectors is to be exercised fairly and/or in accordance with the principles of natural justice.'
They ask for a declaration that the appointment or purported appointment was ultra vires and invalid.
It is important to know the background of the legislation. It sometimes happens that public companies are conducted in a way which is beyond the control of the ordinary j shareholders. The majority of the shares are in the hands of two or three individuals. These have control of the company's affairs. The other shareholders know' little and are told little.
They receive the glossy annual reports. Most of them throw them into the wastepaper basket. There is an annual general" meeting but few' of the shareholders attend. The whole management and control is in the hands of the directors. They are a self-perpetuating oligarchy; and are virtually unaccountable. Seeing that the directors are the guardians of the company, the question is asked: quis custodiet ipsos custody? Who will guard the guards themselves?"
"The only remaining point is that counsel for the company asked us to review the Secretary of state' s decision itself. He cited such cases as Padfield v Minister of Agricultural, Breen v. Amalgamated Engineering Union, Secretary of State for Employment v. Associated Society of Locomotive Engineers and Firemen (No.2), and Secretary of State for Education and Science v. Metropolitan Borough of Tameside. He said that the Secretary of State' s discretion in many cases is subject to review by the court. None of us would disagree with that proposition.
Time and time again lately we have review ed the discretion of a Minister if it has not been properly exercised, or if it has been misused. But in this case there is no ground whatever for thinking that the Secretary of State' s discretion has been in any way improperly used. Counsel for the company put it this way. He said: "This is a completely innocent company , there is nothing whatever against it at all, and it follows there can have been no reasonable ground for the Secretary of State' s decision."
"There may be nothing against the company itself, but can the company speak for all the persons concerned with the management of its affairs? Clearly not. Section 165(b)(ii) is not concerned only with the company itself. The company may be the innocent dupe of others. The section is concerned with the 'persons concerned with its formation or the management of its affairs'. They may have been guilty of misconduct such as to merit inquiry. We know that, when these inquiries are held, those persons who are the subject of them often complain about them. They say that the machinery operates unfairly against them. Such complaints are usually unfounded. They are made so as to delay the inquiry, or to lessen the effect of the report of the inspectors. But, whether well-founded or unfounded, it is no reason for abandoning this machinery. It is the only means given to / the public by which the conduct of companies can be investigated. Parliament has clearly enacted that there should be power, under the control of the Board of Trade, on behalf of the public at large, for an inquiry to be made into the conduct of the affairs of a company, if there are circumstances which appear to the Secretary of State to suggest 'fraud, misfeasance or other misconduct'. I do not think we should encourage or support any attempt to delay or hold up the inquiry. To my mind the action is without foundation. The judge was quite right to strike it out. I would dismiss the appeal accordingly."[emphasis supplied]
15. Another limb of the argument is that since, the order to investigate inherently contained adverse effects for the business, functioning of company and the members, therefore the petitioner company is entitled to an opportunity of hearing, before passing of such order. It is evident that no right of hearing, was provided in 29 of Act of 1997. The vires of said section was not questioned before me but right of prior hearing reiterated. Learned counsel made reference to sub-sections (3) & (5) of section 22 to claim an opportunity of hearing. The provisions of sub-sections
(3) & (5) of section 22 of Act 1997 cannot be stretched to subject the powers exercisable under section 29-ibid. Even otherwise, sub-sections (3) & (5) of section 22-ibid, have no application in the absence of any adjudicatory process for determination of rights claimed. The order to investigate, simplicitor, does not involve adjudication of any rights, determination of any question or any conclusive decision thereof. In essence, the petitioner Company averred that order in question lacked procedural unfairness - as no notice was issued before passing order of investigation.
Whether the question of procedural fairness arises in the nature of the proceedings in issue - when simplicitor order to investigate has been passed. The issue of procedural fairness and exceptions thereto have been discussed in book titled as DE SMITH'S JUDICIAL REVIEW (Sixth Edition), relevant portion available at page 441 (Chapter-8 "Procedural Fairness: Exceptions") is reproduced hereunder: "Several factors may be identified as capable of excluding the normal procedural fairness requirements: (a) express statutory exclusions (b) legislation expressly requires fairness in some situations, but is silent about others (c) fairness in the form of disclosure would be prejudicial to the public interest; (d) prompt action is needed, (e) it is impractical to comply with fairness requirements; (f) a procedurally flawed decision has been followed by a hearing or appeal that is fair; (g) the procedurally flawed decision is merely a preliminary one; (h) the procedural defect would have made no difference to the outcome; and (i) the failure to provide a fair procedure is no fault of the decision-maker."[Emphasis supplied]
16. Though there is no procedural or statutory defect in instant case of ordering of investigation under section 29 of Act of 1997 but even if there is some alleged procedural unfairness as claimed by petitioner, it would be inconsequential as the action taken is merely a preliminary step to collect facts and information, which otherwise constitutes an exception to the claim of procedural fairness.
17. The learned counsel for the petitioner has pleaded violation of Article 10-A of the Constitution of Islamic Republic of Pakistan 1973, which is by and large similar to Article 6 (1) of the European Convention on Human Rights Convention (ECHR). It is expedient to reproduce Article 6(1) of ECHR: "1. In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impa rtial tribunal established by law.
Judgment shall be pronounced publicly but the press and public may be excluded from all or part of the trial in the interests of morals, public order or national security in a democratic society , where the interests of juveniles or the protection of the private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice."
The question of appointment of Inspecto rs for the purposes of investigating affairs of the Company came up for adjudication before the European Court of Human Rights in case reported as Fayed v. United Kingdom (1994) 18 E.H.R.R.393. The brief facts are that inspectors were appointed to investigate the affairs of House of Fraser Holdings (HOFH), in particular , the circum stances surrounding the acquisition of House of Fraser (HOF) a public limited Company . Provisional conclusions drawn by the inspectors were unfavou rable, followed by publishing of report. The applicants alleged violation of Article 6 (1) and approached the Court. The action was dismissed.
Relevant portions are reproduced hereunder as; Held; In order for an individual to be entitled under Art. 6(1) to a hearing before a tribunal, there must exist a dispute (contestation) over one of his or her civil rights or obligations. The result of the proceedings in question must be directly decisive of such right or obligation, and merely tenuous connections or remote consequences were insuf ficient to bring the Article into play. The functions performed by the Inspecto rs were essentially investigative.
The object of the proceedings before the Inspectors had not been to resolve any dispute (contestation), whether between Lonrho and the applicants, or between the applicants and the Secretary of State or the Inspectors. The Inspectors' report did not "determine" the applicants' civil rights to a good reputation for the purposes of the Article, nor was its result directly decisive for such right. Acceptance of the applicants' argument would unduly hamper the effective regulation in the public interest of complex financial and commercial activities, and in the Court's view, investigative proceedings of the kind in issue in the present case fell outside the ambit and intendment of Article 6(1).
'Judicial Review'
Para 44. "The grounds on which administrative action (such as the Secretary of State's decision to publish the report) is subject to judicial control are the three traditional grounds of judicial review described by J Lord Diplock in Council of Civil Service Union v. Minister for the Civil Service. These grounds are illegality , irrationality and procedural impropriety .
"Illegality" means that the decision-maker must understand correctly the law that regulates his decision-making power and must give ef fect to it.
"Irrationality" , or what is often also referred to as "Wednesbury unreasonableness" applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sens ible person who had applied his mind to the question to be decided could have arrived at it. 'Irrationality' or 'Wednesbury unreasonableness' is a narrowly restricted ground of judicial revie w of an administrative decision. Where the existence or non-existence of a fact is left to the judgment and discretion of a public body and that fact involves a broad spectrum ranging from the obvious to the debatable to the just conceivable, it is the duty of the court to leave the decision of fact to the public body to whom Parliament has entrusted the decision-making power save in a case where it is obvious that the public body , consciously or unconsciously , are acting perversely".
"Procedural impropriety" covers failure to observe basic rules of natural justice or failure to act with procedural fairness towards the person who will be affected by the decision, as well as failure to observe procedural rules that are expressly laid down even where such failure does not involve any denial of natural justice.
Para 45. "Judicial review would, for example, provide a remedy if Inspectors under the Companies Act were prejudiced or biased against the subjects of their report ; or if the Inspectors reached conclusions which there were no facts to support, or took into account irrelevant considerations, or failed to take account of relevant considerations, or reached conclusions which no reasonable person in their position could have reached; or if their findings have not been properly based on material which has probative value; or if the Inspectors were dishonest or acted in bad faith; or if the Inspectors acted ultra vires or beyond their legal power ; or if the Inspectors acted against the legitimate expectations of those concerned; or if the Inspectors acted contrary to the rules of natural justice ; or if the Inspectors acted unfairly Article 6(1) of the Convention; Para 64. "The Commission notes that the function of the Inspectors was to inquire and report to the Secretary of State for Trade and Industry on the takeover of HOF by HOFH, As, owners of HOFH, the applicants were required to provide evidence to the Inspectors about the takeover. The Commission considers that it is a matter of genera! public interest and necessary in a democratic society that governments exercise supervisory controls over large commercial activities in order to ensure good management practices and the transparency of honest *414 dealings. Such transparency is enhanced by the publication of Inspectors' reports. Publication enables the public, particularly small investors and shareholders, to acquire fuller information about major business interests. Publication will also call the attention of business enterprises to standards which they should observe. Furthermore, administrative inquiries by Inspectors may lead to legislative reforms or policy changes, as happened in the present case with account being taken of the Inspectors' recommendations in the HOFH inquiry for certain reforms incorporated in the Companies Act 1989. Such inquiries may also lead to civil or criminal proceedings against the company or individuals concerned before the normal courts, but the Inspectors' report does not determine civil or criminal liability. This investigative rather than determinative role of the Inspectors is further reflected in the fact that, if it should be considered, in the light of the Inspectors' report, that civil or criminal proceedings should be initiated against a particular company or individual, the report is only admissible as evidence of the Inspectors' opinion. It would be for the courts to determine the actual facts and legal consequences for the parties. The Commission is of the opinion, therefore, that Article 6(1) of the Convention was not applicable to the proceedings before the Inspectors in the present case because they did not determine the applicants' civil rights or obligations within the meaning of that provision.[Emphasis supplied]
18. Lord Denning in case "Pergamon Press Ltd. Re , (1971) 41 Comp Cases 769 observed as follows: "14. I cannot accept Mr. Fay's submission. It is true, of course, that the inspectors are not a court of law. Their proceedings are not judicial proceedings: see In re Grosvenor & West-End Railway Terminus Hotel Co. Ltd., (1897)
76 L.T. 337. They are not even quasi-judicial, for they decide nothing; they determine nothing. They only investigate and report. They sit in private and are not entitled to admit the public to their meetings: see Hearts of Oak Assurance Co. Ltd. v. Attorney-General, (1932) A.C. 392. They do not even decide whether there is a prima facie case, as was done in Wiseman v. Borneman, (1969) 3 WLR 706: (1969) 2 All ER 275 (All): (1970) 75 ITR 652 (HL).
[emphasis supplied]
19. The judgments referred by the learned counsel for the petitioner company are distinguishable and not applicable to the facts and circumstances of the case. None of these judgments dilate upon the authority / power of the Commission under section 29 of Act of 1997. The facts in Atlas Power case were different, wherein the allegations of bagging excessive power tariffs were explained in wake of tariff rate fixed by NEPRA. Ample material was available with the Court to dissect the allegations. Messrs Kaloodi International Pvt Limited case, relates to NAB. In Service Industries Textiles Limited case, enforcement orders were passed and inspectors appointed without hearing the Company. In University of Dacca's case the orders of expulsion from University were passed without soliciting any explanation. In Mian Miraj Din's case, the issue pertains to the interpretation of section 265-A of erstwhile Ordinance 1984. In Abdul Majeed Zafar's case, seniority list was withdrawn without assigning any reason and non-issuance of any notice. Most of the judgments referred reiterates to principles of natural Justice shall. Messrs Dewan Salman Fiber Ltd relates to cancellation of lease and withdrawal of acquisition in terms of section 48 of Land Acquisition Act 1894. The case of Messrs Prime Chemicals relates to imposition of Sales Tax and dilates upon the adjudicatory process. The case of Ghulam Sarwar Zardari relates to criminal investigation, which has no relevance to the facts and circumstances of this case. The case of Murree Brewery Co. Ltd dilates upon the question of entertaining writ in the wake of remedy of appeal. Mian Asghar Ali's case, dwells on the power of the court to conv ert one kind of proceedings into another . Muhammad Anis' s case (supra) relates to the question of promotion and eligibility of Civil Servant in the context of Article 212 of the Constitution of Pakistan 1973. The Judgments referred by the learned counsel for SECP emphasized the princ iple that mere order for investigation do not infringe any right, which is purely a fact finding exercise. Emphasis was placed on case of Diamond Industries Limited, wherein reliance was placed on the case of Mian Miraj Din's case, supra. Respondents relied upon judgm ent reported as "Attock Refinery Ltd." (supra), relevant portion whereof is reproduced hereunder: "When learned counsel for the petitioner was asked to state the reservations of the company , he could only say that the appointment of investigators is likely to affect the reputation of the company . This can hardly be a ground for rendering redundant the provisions of section 265 of the Companies Ordinance.
20. Since both the learned counsels have referred to the case law from Indian Jurisdiction relating to "Barium Chemicals Limited' case" and "Rohtas Industries Limited case" it needs some elaboration. The ratio laid down in said cases - dealing with sections 235 and 237 (b) of Companies Act 1956 and power of the Central Government to order investigation - was that proper grounds must exist before ordering investigation, certainly having adverse implications for the company . The facts of said cases are distinguishable.
21. In view of submissions, it is clear that discretion vests in the Commission to assess the information available and thereafter to decide on the basis of the circumstances prevalent in each case. This court cannot review / evaluate the sufficiency or veracity of the allegations and the circumstances but examine an element of bad faith, in view of the available record and submissions. In order to adjudicate upon the element of bad faith it is also essential to examine the scope of order of investigations, its nature and object thereof. In Norwest Holst Ltd's case, supra, Lord Denning agreed that appointment of inspectors puts the company's management under cloud, but even so did not agree to subject the power of ordering investigation to the requirements of natural justice. It is evident from the perusal of relevant sections that order of investigation is not an end by itself, it is only a means to find out full facts of acts complained. It is nothing but an exploratory measure to be proved or disproved with reference to the facts later on ascertained. In the instant case, it is only the collection of information, without even appointment of inspectors, to ascertain that whether ay offence or contravention has been committed. While interpreting section 29 of Act of 1997, one should not loose sight of the powers otherwise conferred on the Commission in terms of sections 258 and 259 of Act of 2017, which do not provide affording any opportunity of hearing. Procedural fairness does not stand comprised mere with passing of an order of investigation, which is merely a step towards collection of information. The issues regarding applicability of principles of natural Justice, due process and procedu ral fairness were discussed in earlier part of this judgment.
22. A concern is expressed while making submissions that what are those distinctive circumstances / factors, which led the Commission to invoke section 29 of Act of 1997 and not to proceed under sections 256 and / or 257 of Act of 2017. It is evident from bare perusal of sections 256 and 257 of Act of 2017 that by and large protection is afforded to the rights and interests of the members of the company. The petitioner company is not a public limited, listed or non- listed, but incorporated under section 42 of Ordinance of 1984 - limited by Guarantee - closely managed by the members - wherein there are few instances of differences / disagreements amongst the members, unless some disgruntled / dissatisfied members revolt against excessive majority. In these circumstances, there is rarely an opportunity to ascertain / identify fraudulent and illegal conduct of business, if carried out by the members for collective benefit. And if the members are happy / content and acting in unison, hardly any situation would arise - unless some creditor objects to the conduct of business - necessitating investigation or appointment of inspectors.
This case is different, wherein no concern has been raised by existing member, but information was brought to the knowledge of the Commission, which then proceeded to order investigation. There is nothing to substantiate bad faith on the part of the Commission. The exercise of discretion under section 29 of Act of 1997 is justifi ed in view of allegations. The concern is misconceived and overlooked the scheme of law. The report, when complied, is not itself a legal decision, nor are the opinion of the inspectors expressed therein binding upon any person in the manner that a judgment of the courts is. It is merely an expression of findings and opinions of inspectors.
23. Learned counsel for the petitioner further contends that no such conditions exist as to warrant an order of investigation. The submissions regarding previous investigations carried out and comments submitted with Human Rights Cell, Hon'ble Supreme Court of Pakistan do not establish bad faith on the part of the Commission. Why is the petitioner company so reluctant to provide or furnish requisite information, solicited vide letter dated 12.01.2019, if there is no truth in the allegations? Any further discussion on the allegations levelled, would prejudice the case of the parties.
24. In brief, the circumstances exist to proceed in exercise of powers conferred under section 29 of Act of 1997. No prejudice shall be caused merely upon ordering of investigation, which exercise of power is in accord with the mandate of section 29 of Act of 1997. This court is not inclined to exercise jurisdiction under section 34 of Act of 1997, which is otherwise pre-mature and not available to the petitioner in the absence of any order by the Appellate Bench of the Commission.
25. In the circumstances, no case is made out for interference in the order of investigation, which does not suffer from any illegality , irrationality , procedural impropriety .
26. In view of the above, this petition is without any merit and same is, therefore, dismissed.